Financial Regulatory Reform Bill Becomes Law

July 22, 2010  With the signing by President Obama on July 21, the Dodd-Frank Act, a comprehensive regulatory reform bill, is now law.

For the past two years, NASCUS has communicated the state credit union perspective on federal regulatory reform efforts, testifying several times in the House and Senate and contributing the state credit union regulatory voice as legislation moved forward.

The law requires 243 new rules, 67 one-time reports and 22 periodic reports. The bill also establishes a new Consumer Financial Protection Bureau (CFPB), housed at the Federal Reserve. For financial institutions, including credit unions, with under $10 billion in assets, consumer protection examination will remain with the prudential regulator.

Regarding preemption of state consumer protection laws, the Act states that the Office of the Comptroller of the Currency can only preempt state law if they "prevent or significantly interfere with the business of banking." State attorneys generals' enforcement authority is also reinforced in the final bill; further, they will also be able to enforce some federal consumer protection rules from newly created CFPB.

The law makes permanent bank and credit union deposit insurance to $250,000 for insured accounts of the National Credit Union Share Insurance Fund (NCUSIF) and Federal Deposit Insurance Corporation (FDIC). It also insures non-interest bearing transaction accounts at insured institutions.

Concerning interchange fees, the Federal Reserve is directed to set a "reasonable" rate for interchange fees for debit cards. Government issuers are exempt, as well as financial institutions under $10 billion in assets.

To address systemic risk, the law establishes a new Financial Stability Oversight Council charged with monitoring and tackling systemic risk, as well as identifying and imposing certain regulatory requirements for financial entities posing system-wide risk. The Chairman of the National Credit Union Administration is a voting member of this Council. Also, a state banking supervisor, state securities commissioner and state insurance commissioner are included in the Council as nonvoting members.

NASCUS is currently studying the law to understand the additional impacts on state regulators and state-chartered credit unions.